All the UK's national radio stations and many local services will stop broadcasting on analogue by the end of 2015, according to ambitious switch-off targets unveiled by the government today.

The Digital Britain report, published today, said announced a "Digital Radio Upgrade" that would see services on national and local digital audio broadcasting (DAB) multiplexes stop broadcasting on analogue.

Vacated FM spectrum will be filled by a new tier of ultra-local radio consisting of small local commercial and community stations. Radio stations currently broadcasting on medium wave will upgrade to DAB.

The switchover will be announced two years in advance and not until digital accounts for 50% of all radio listening, said the report. The government is hopeful this target can be met by the end of 2013.

Today the government has also required that DAB must be comparable to current FM coverage, and DAB must reach 90% of all the population and all major roads before the upgrade timetable can begin.

The absence of in-car digital radio has hampered further takeup of the new technology, but the government has today recommended that all new car radios sold in the UK by the end of 2013 should be digital.

Despite the popularity of DAB radio sets with consumers, the vast majority of radio listening continues to be to analogue.

Digital accounted for 20.1% of radio listening in the first three months of 2009. DAB remains the most popular digital platform, accounting for 12.7% of digital listening.

Achieving switchover will require a huge increase in the popularity of digital and DAB if the government is to hit its initial 50% reach target, and a position where it can realistically switch off the analogue signal for national radio stations without millions of listeners losing out.

But an early switch-off date will be welcomed by the commercial radio sector. Stephen Miron, the chief executive of the commercial sector's biggest radio group, Classic FM and Capital Radio parent Global Radio, called on the government to set a date "the earlier, the better".

"Only that certainty will give us the leverage to get the car-makers, the set manufacturers, the multiplexes – and many others – on board. Whatever the date, and we personally believe the earlier the better – a firm date needs to be set," Miron told a conference in April.

Commercial radio operators including Global Radio, which owns Classic FM, and UTV-owned TalkSport and Absolute Radio will have their licences extended by media regulator Ofcom to compensate for the extra investment that they will be required to make in digital, the government said.

The report said the cost of the rollout of the DAB transmitter network would require a "significant contribution" from commercial operators as well as the BBC, which it said may be able to use some of the estimated £200m underspend in the corporation's digital switchover fund.

Commercial stations will be able to reduce the number of locally produced hours they broadcast in exchange for an enhanced commitment to regular and updated local news. Stations will be given greater flexibility to co-locate and analogue services will be able to merge to form new DAB operations.

The report said DAB was "at least for the foreseeable future ... the right technology for the UK", with more than 9m receivers now sold in the UK.

But it said DAB would be only one among a range of platforms including internet, mobile broadband and digital TV, for the distribution of digital radio.

Digital Britain also said broadcasters should be prepared to experiment with more advanced compression technologies and manufacturers must ensure DAB sets are futureproofed and able to receive DAB+ and DMB-A.

The government called on radio operators to deliver new niche services on DAB, "such as a dedicated jazz station and gain better value from existing content, such as live coverage of Premiership football or uninterrupted coverage from music festivals".

Commercial radio operators have so far been unable to make niche digital services pay. But with a prospective analogue switch-off date set for 2015, and backing from car manufacturers for in-car digital radio, the sums may start to add up.

Andrew Harrison, the chief executive of commercial radio trade body, the RadioCentre, said: "For radio to flourish in the digital age we require a digital strategy and, on first inspection, we are encouraged that Digital Britain sets out a clear roadmap for our industry's future. Clearly, implementation of that roadmap is now a priority for RadioCentre alongside all the industry stakeholders.

"We think that Digital Britain is right to identify a target date of 2015 to upgrade our sector to digital radio while also recognising the importance of meeting key criteria to trigger switchover and the need for intervention to drive the behaviour of manufacturers, the motor industry and other stakeholders. This will enable our members to plan and invest for their future; we now have a firm consensus that digital is the route forward for radio's future.

"We agree that the BBC is a major stakeholder in achieving greater coverage for DAB and are delighted that the report identifies the digital switchover surplus as a further route to securing funding for this in addition to transmission cost savings from the Arqiva/NGW merger and the end of dual transmission."

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